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2012 DIGILAW 1287 (MP)

Pithampur Steels Ltd. v. Kotak Mahindra Bank Ltd.

2012-12-13

PRAKASH SHRIVASTAVA, SHANTANU KEMKAR

body2012
ORDER Shantanu Kemkar, J. 1. Heard on the question of admission. Through this petition under Article 226/227 of the Constitution of India, the petitioner borrower has challenged the order dated 23.08.2012 (Annexure P3) passed by Debts Recovery Appellate Tribunal (for short DRAT) Allahabad by which the first respondent's Appeal No.R122/2011 challenging the order dated 07.09.2011 passed by Debts Recovery Tribunal, Jabalpur (for short DRT) in Securitisation Application No.162/2011 has been allowed and the case has been remanded back to the DRT for deciding the questions other than the questions decided by the said order. 2. Briefly stated the petitioner company had availed the cash credit facility from the State Bank of India ( for short the SBI). As the petitioner defaulted in making payment a Civil Suit No.2A/1998 for recovery of Rs.1,58,34,341.84/N.P. was instituted against it by the SBI before the District Judge, Indore. On establishment of the Tribunal under the Recovery of Debts due to Banks and Financial Institutions Act, 1993 (for short RDDBFI Act) the said Civil Suit was transferred to the Tribunal and was registered as T.A.No.905/98. The Tribunal vide order dated 15.11.2000 decreed the said TA in favour of the SBI. The appeal filed by the petitioner under Section 20 of the RDDBFI Act before the DRAT bearing No.R02/2001 was dismissed by the DRAT vide order dated 07.03.2011. The decree holder SBI filed execution proceedings for recovery of the decretal amount before the recovery officer. During the pendency of the execution on account of acquisition of rights and interest in the financial assets of the SBI by the first respondent Kotak Mahindra Bank, the first respondent was impleaded in the said execution in place of the SBI. 3. Thereafter, invoking the provision under Section 13 (2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short the SARFAESI Act) the first respondent Kotak Mahindra Bank issued a notice dated 31.12.2010 to the petitioner, requiring the petitioner to discharge the liability. Since the petitioner failed to discharge its liability within time specified in the said notice, possession of the secured assets of the petitioner was taken by the first respondent under Section 13 (4) of the SARFAESI Act. 4. Challenging the action of taking over of the possession by the first respondent, the petitioner approached the DRT by filing an application under Section 17 of the SARFAESI Act. 4. Challenging the action of taking over of the possession by the first respondent, the petitioner approached the DRT by filing an application under Section 17 of the SARFAESI Act. The petitioner raised the grounds that (a) the action taken by the first respondent under Section 13 (2) is illegal as no valid notice was issued and (b) the said action taken under Section 13 (2) was barred by limitation. The DRT vide order dated 07.09.2011 allowed the application and set aside the notice dated 31.12.2010 issued by the first respondent under Section 13 (2) of the SARFAESI Act and also directed the first respondent to redeliver the possession of secured assets to the petitioner, which was taken by it under Section 13 (4) of the SARFAESI Act. 5. Aggrieved by the order dated 07.09.2011 passed by the DRT the petitioner filed an appeal under Section 18 of the SARFAESI Act before the DRAT. The DRAT vide order dated 28.03.2012 passed in Appeal No. R122/2011 allowed the appeal filed by the first respondent and remanded the matter back to the DRT for deciding the other question except the question decided in appeal by DRAT. Feeling aggrieved, the petitioner has filed this petition. 6. We find that before the DRAT two questions were raised by the first respondent. Firstly, that the DRT was not justified in holding that since the Bank has proceeded to take action under the RDDBFI Act, it could not have proceeded to take action under the SARFAESI Act and secondly that the DRT had committed error in holding that the initiation of the proceedings by the first respondent under Section 13 (2) was barred by limitation. 7. Heard learned counsel for the parties at length, perused impugned order and annexure. 8. Although learned counsel for the petitioner did not seriously urged the two grounds deciding which the matter was remanded to the DRT, however we are dealing with both the said grounds. We are also dealing with the ground strenuously urged by the learned counsel for the petitioner that in the absence of declaration of NPA in the notice under Section 13 (2) the entire action of the first respondent is vitiated. 9. As regards the first ground raised before and decided by the DRAT we find that in the case of Modern Times Industries Vs. 9. As regards the first ground raised before and decided by the DRAT we find that in the case of Modern Times Industries Vs. DRAT, Allahabad 2012 (1) DRTC 325 (All.) and M/s ACE Media Advertisers Vs. Bank of Baroda 2009 (75) ALR 701 the Allahabad High Court has held that the remedy under RDDBFI Act and SARFAESI Act are not the separate remedies but are the remedies which are supplementary to each other. While holding so the Allahabad High Court relied upon the judgment of the Supreme Court in the case of M/s Transcore v. Union of India AIR 2007 SC 712 = (2008) 1 SCC 125 in which it was observed that it is wrong to say that the RDDBFI Act and SARFAESI Act provide parallel remedies. The remedy under RDDBFI Act short as compared to the SARFAESI Act, which refers to acquisition and assignment of the receivables to the asset reconstruction company and which authorizes banks / financial institutions to take possession or to take over management which is not there in RDDBFI Act. It is for this reason, the SARFAESI Act is treated as an additional remedy in Section 37 of the SARFAESI Act, which is not inconsistent with the RDDBFI Act. It has been further observed by the Supreme Court that the remedies of enforcement of security interest under the SARFAESI Act and RDDBFI Act are complimentary to each other and there is no inherent or implied inconsistency between these two remedies under the two different Acts, and as such, the doctrine of election has no application in the matter for exhausting the remedy by invoking the provisions of Section 13 (2) of SARFAESI Act. In the circumstances, we affirm the view taken by the DRAT that the first respondent Kotak Mahindra Bank was entitled to proceed under SARFAESI Act inspite of the fact that it had initiated recovery proceedings under the RDDBFI Act. It is also pertinent to mention here that the term 'Debt' as defined under Section 2 (g) of the RDDBFI Act includes any liability whether payable under a decree or order of any civil Court or any arbitration award or otherwise or under a mortgage and subsisting on and legally recoverable on the date of application. The definition of 'Debt' under RDDBFI Act has been adopted under Section 2 (ha) of the SARFAESI Act. The definition of 'Debt' under RDDBFI Act has been adopted under Section 2 (ha) of the SARFAESI Act. In this view of the matter the view taken by the DRAT in this regard is upheld. 10. As regards the question of limitation decided by the DRAT, since the decree passed under the RDDBFI Act was already put to execution and recovery proceedings were pending, it was a “live claim” and therefore, the DRAT has rightly held that the proceedings could not have been treated to be barred by limitation. 11. In the circumstances, we find that the view taken by the DRAT for deciding both the questions raised before it, is perfectly legal and proper and needs no interference in this writ petition. 12. Learned counsel for the petitioner next contended that in the notice dated 31.12.2010 issued under Section 13 (2) there exists no declaration of NPA, therefore, the notice was invalid and, as such, no further action could have been taken on the basis of the said invalid notice. So far as this argument is concerned, in our considered view, it is wholly misconceived. Section 13 (2) requires the debt to be classified as NPA and also requires issuance of notice in writing to discharge the liability. On going through the notice dated 31.12.2010 which was issued by the first respondent under Section 13 (2) of the SARFAESI Act, we find that the first respondent Kotak Mahindra Bank had clearly stated as under:- “The Company failed to maintain financial discipline and defaulted in the repayment of the loan amounts as and when the same fell due for payment. In view of the defaults committed by the Company, SBI in accordance with the Reserve Bank of India directives and guidelines classified in its books the account of the Company as Non Performing Asset [NPA]. SBI also filed a recovery suit before the Hon'ble Debts Recovery Tribunal Jabalpur (DRT). The said suit was decreed in favour of SBI by the Hon'ble DRT and a Recovery Certificate was issued in favour of SBI. During the pendency of the recovery proceedings, SBI had assigned the debts of the Company together with the underlying securities in favour of Kotak Bank. The said suit was decreed in favour of SBI by the Hon'ble DRT and a Recovery Certificate was issued in favour of SBI. During the pendency of the recovery proceedings, SBI had assigned the debts of the Company together with the underlying securities in favour of Kotak Bank. SBI has assigned all its rights, title and interest in all the agreements, deeds, documents and benefits under the decree and/or recovery certificate, issued by any Court/Authority and/or Tribunal in respect thereof; in relation to or in connection with the facilities to Kotak Bank. Kotak Bank is therefore entitled to initiate, adopt appropriate legal action and/or continue to pursue any existing legal action in its own name against the Company, its Directors/Guarantors for recovery of the outstanding amounts due and payable by the Company and its Directors/Guarantors under the said facilities. Despite repeated requests made to the Company to discharge its liability and despite issuance of Recovery Certificate by Hon'ble Debts Recovery Tribunal – Jabalpur, the Company has failed and neglected to repay the said dues/outstanding liabilities. Taking into account the Company's conduct with respect to the nonpayment of the legitimate dues, Kotak Bank has become entitled to and does issue this notice to you U/s 13 (2) of SARFAESI Act. Under the circumstances, Kotak Bank hereby calls upon the Company, Pithampur Steels Limited and demands to pay to Kotak Bank at Mumbai within a period of 60 (Sixty) days from the date of this notice; an amount of Rs.14,02,94,627/(Rupees Fourteen Crores Two Lakhs Ninety Four Thousand Six Hundred And Twenty Seven Only) outstanding as on December 31, 2010 being the aggregate of the amounts inclusive of interest due and payable by and demanded of the Company in respect of all the financial assistance availed by the Company. Annexed and marked as Annexure “C” is the detail of the outstanding amounts payable as on December 31, 2010.” (Emphasis Supplied) 13. In view of the aforesaid categorical averments in the notice dated 31.12.2000 issued by the first respondent, making it clear that the debt has been classified as NPA and requiring the petitioner to discharge the liability, in our considered opinion, the first respondent had duly complied with the requirement of the notice under Section 13 (2) of the SARFAESI Act. In view of the aforesaid categorical averments in the notice dated 31.12.2000 issued by the first respondent, making it clear that the debt has been classified as NPA and requiring the petitioner to discharge the liability, in our considered opinion, the first respondent had duly complied with the requirement of the notice under Section 13 (2) of the SARFAESI Act. As a result the petitioner's contention that there is no compliance of statutory requirement about NPA in the notice under Section 13 (2) of the SARFAESI Act cannot be accepted. 14. Accordingly, we find no merit in this petition. The petition fails and is hereby dismissed. 15. No orders as to the costs.